Tesla shares are down 34% this year.Some investors express doubts about economic recovery | Wilnesh News
Tesla lost its way. The dominant U.S. electric-car maker, once hailed as an innovator in the auto industry, has faced growing pressure in recent months to contend with growing competition and falling demand in China, forcing Elon Musk ( The company led by Elon Musk cuts prices to boost sales. The issues have unsettled investors, sending shares down 34% since the start of 2024, and raising concerns about Tesla’s health and growth potential. The latest U-turn is a sharp reversal after Tesla’s market capitalization surged to a peak of more than $1.2 trillion. Today it is worth about $525 billion. TSLA Year-to-date Tesla shares set to rise sharply in 2024 Even bulls are getting worried, with Morgan Stanley analyst Adam Jonas admitting last week that Tesla’s woes could temporarily push the stock down to $100 — —This is his worst case scenario. Wedbush’s Dan Ives called the first-quarter delivery slump a “complete disaster.” Things are much more optimistic on Wall Street than before. FactSet data shows that the number of analysts with an equivalent buy rating on Tesla fell to just 33%, compared with 53% as of the end of March 2023. “We believe this is a seminal moment in the Tesla story, with Musk either turning things around and reversing poor first-quarter results,” Ives said in a note to clients. Ives continued: “Otherwise, some dark days are clearly coming, which could disrupt Tesla’s long-term narrative.” While some investors expect emerging themes such as artificial intelligence, robotaxi programs or Autopilot involving fully autonomous vehicles to drive Long-term growth for Tesla, but even those betting on the stock are bracing for a long and bumpy road to recovery. Tesla’s inability to meet expectations and boost demand for its models has disappointed investors, fueling fresh skepticism. The stock plunged 12% in one day in January after missing analysts’ fourth-quarter forecasts and warning of slow growth. The company fell more than 6% last week after reporting disappointing first-quarter deliveries. “The market doesn’t like stocks right now that can’t beat earnings,” said Michael Sansoterra, chief investment officer at Silvant Capital Management. “Unfortunately, (Tesla’s) life cycle at this particular moment is inconsistent with what the market is willing to pay.” He attributed Tesla’s recent quarterly decline to worsening profit margins as it cut prices to boost demand. Tim Pagliara, chief investment officer of CapWealth, believes that investors and Wall Street have “unrealistic expectations” for Tesla’s valuation, with its price-to-earnings ratio being much higher than that of existing manufacturers such as General Motors, Ford and Toyota. To be sure, Tesla isn’t the only company to have struggled recently, as enthusiasm for electric vehicles has waned, in part due to a newfound love for hybrids. The electric vehicle market has taken a beating in recent months, with companies such as Ford forced to rethink plans, citing the industry’s higher costs relative to internal combustion engine vehicles. Sansoterra explained that the industry has also stalled due to the significant investment required in infrastructure such as charging stations, as well as technological advances in battery storage, size and capacity. “It’s not done yet, it’s not mature yet,” said the Silvant Capital manager. “If you think back to the (personal computer) era, this is still an evolving industry and there’s still a long way to go.” Beyond Electric Vehicles Other Investments Investors are hopeful for Tesla, arguing that businesses outside of its main automotive business are key to the company’s recovery. This week, Ark Investment Management CEO Cathie Wood said in an interview with CNBC’s Andrew Ross Sorkin that Tesla’s stock price may rise over the next five years as themes of artificial intelligence, robotics and energy storage unfold. It’ll be $2,000. Wood’s comments came a day after her company purchased nearly $40 million worth of Tesla stock. “It reminds me of 2018-19,” she said. “We’re in a trading range until more analysts and investors understand how provocative the convergence of these three technologies will be.” Wood isn’t the only one supporting Tesla. Altimeter Capital’s Brad Gerstner last month revealed a new bet on the electric car maker, citing the company’s future prospects for artificial intelligence and saying the stock was already pricing in bearish investor sentiment. While the stock will be volatile, he sees support for Elon Musk and artificial intelligence as a “no-brainer.” Will McDonough of Corestone Capital said Tesla’s stock price is plagued by a lack of understanding among investors about the value of these alternative businesses and their future contribution to Tesla’s profits. TSLA 1Y Peak Tesla Share Price Last Year “The value of Tesla as a car company is similar to the value of Amazon as a book-selling company,” the investor said. “You just don’t see the full picture here.” But even those who are bullish on the stock’s long-term potential expect tough times ahead. “There are definitely concerns about demand for Tesla vehicles,” said Ben Kallo, senior research analyst at Robert W. Baird. “Some investors are willing to pay (further) attention…but there are still concerns in the short term. We will face another quarter or two of turmoil.” Tesla will announce its second quarter in less than three weeks (that is, April 23) First quarter financial results.
